Tesco PLC: An In-Depth Analysis of Corporate Governance Failures

This report provides an in-depth analysis of the corporate governance failures at Tesco PLC. It examines the key issues, including a lack of expertise on the board, inadequate leadership, and insufficient scrutiny, which contributed to significant problems within the company. The report references the UK Corporate Governance Code and other relevant research to support its arguments. It also discusses the impact of these failures, such as the overstatement of profits and the arrests of key figures at other companies like Nissan. The report suggests resolutions, such as employing Non-Executive Directors with relevant experience, and the importance of external directors on the board to improve control and governance. Furthermore, it includes a comparison with similar cases like Carillion PLC and provides a conclusion on the catastrophic consequences of these governance failures.

Tesco PLC
.

Introduction
 Key role the three problems
 Lack of expertise: Decision making
 Lack of leadership: 2014
 Lack of scrutiny: overstatement of profit.

Lack of Expertise - Resolution
 Corporate Governance Code - Board Leadership and Company Purpose - board
require valuable experience (FRC, 2018).
 Company’s board lacking relevant retail experience (LFHE, 2019).
 Majority of the board did not have relevant knowledge - poor leadership and
direction.
 Nissan 2018 - Chairman Carlos Ghosn arrested (Financial Times, 2018).
 Company only had a few outside directors with experience (Konishi & Yamada,
2018).
 Board did not have the relevant knowledge to challenge and question Ghosn’s
decisions.
 Reinforces the Corporate Governance Code - for successful board leadership and
purpose, the board must have experience to challenge decisions (FRC, 2018).

Lack of Expertise - Resolution
 Dezoort and Salterio (2001) - if NED’s have no valuable experience, this
affects decision-making.
 We suggest that for Tesco to improve - company should employ NED’s with
experience.
 Allows them to question and challenge the decisions of the executives.
 Board having more control in company decisions.
 Improving the governance of the company.
 Gibbs and Schendel (1993) - external directors within the board, improves the
control and regulation of board.
 We suggest that Tesco’s include external directors within board.
 Helps the board question the decisions of the executives.
 Improving the purpose and drive of the company.

Lack of Leadership - Resolution
 Every company should have a CEO (McKnight, n.d)
 Laurie Mcllwee left the company before the fall and the company had
no chief financial officer. (On April) (Ahmed, 2014).
 Patisserie Valerie - The books where shown 28m in cash rather than 9.8m
 KPMG closed 70 outlets, with the loss of 920 jobs.
 Chief executive Paul May got suspended (BBC, 2019).

Lack of Leadership - Resolution
What could have been done differently?
 Do not make random expenses, especially in a time where they announced drop in
profit (Case study).
 Philip Clarke, 31m for a jet., 2013.
 A true CEO should find their own vision, be loyal to it, talk about it and stick with it
even if the circumstances are changed (Garten, 2001).
 Thy should have strategic thinking and industry knowledge ((Khurana, 2002).

Lack of scrutiny - Resolution
 The audit committee did not challenge the executives of the Tesco plc, due to following reasons:
 The committee must work independently in specified manner (Sultana, 2015).
 The manner in which committee should scrutinize the decision of company (Ahmed Haji, &
Anifowose, 2016).

Lack of Scrutiny - Resolution
CARILLION PLC. a similar issue relating to lack of scrutiny:
 The audit committee did not challenge the executives of the Carillion plc.
due to following reasons: (Jolly, 2018).
 The committee must work independently in specified manner
 The manner in which committee should scrutinize the decision of company
(Jolly, 2018).

Conclusion
 Catastrophic consequences
 Lack of expertise: no clear direction, lack of knowledge
 Lack of Leadership: can’t take managerial decisions
 Lack of Scrutiny: Absence of reporting process, internal control

References
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